The Economic Impact of COVID-19: A Visual Guide
While real estate has not been negatively impacted by what I will call the COVID-19 Recession of 2020 (at least not yet), pretty much every other part of the economy has been hit quite hard. Indeed, as the Visual Capitalist clearly shows, the crash of the S&P 500 this year has been the fifth highest on record.
While the time from trough to recovery has been of a much shorter duration, this crash was still 60% the size of the 2008 financial crisis and almost half that of the Great Depression.
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Of course, the stock market has since recovered and actually hit a new all-time high. This is a very odd thing to happen in the middle of a deep recession, though, and highlights just how much quantitative easing is going on right now. When shown visually, the Federal Reserve’s unprecedented actions are easier to digest, albeit no less startling:
At the beginning of March of this year, the Federal Reserve’s total assets stood at just over $4.2 trillion. Today, it is closing in on doubling that number at almost $7.1 trillion. (For reference, it was less than $900 billion at the beginning of 2008.)
Inflation is currently very low, but we should not be surprised to see stagflation in the near future given how much money has been injected into the economy.
How the Covid-19 Recession Has Affected the Rest of the Economy
As you have likely noticed, the economy is still a mess right now—other than real estate, that is. A few critical statistics:
- The unemployment rate peaked at in April and is still at a very high level of 7.9% in September.
- The Consumer Confidence Index sits at , just above this year’s trough in May, which was the second lowest rating it’s ever had in the last 50 years.
- Household debt hit a record $14.3 trillion in March 2020 just before the pandemic hit—and is surely higher now.
- Over 400,000 small businesses have already permanently closed and another million or so are at risk.
- The government has spent $5.63 trillion and only brought in $2.82 trillion through the first 10-months of fiscal 2020 for a mind-numbing deficit of . In other words, the deficit is nearly equal to the total tax receipts of the federal government.
- The federal debt is expected to reach 102% of GDP, the highest level since World War II.
Furthermore, some studies warn of an impending wave of evictions and foreclosures, which could throw the United States into a double-dip recession once various moratoriums are lifted. Of course, similar predictions were made for the middle of this year and those did not pan out, so these predictions should be taken with a grain of salt.
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Needless to say, despite recent improvements, the economy is still in very rough shape. Again, the Visual Capitalist provides of just how much damage has been done this year:
Not all is lost though. Unemployment has been cut almost in half and most indicators are moving in the right direction (other than the federal debt of course). Below is the . According to Visual Capitalist:
“Widely seen as a leading business indicator, the PMI is also rebounding. Manufacturing output stabilized as production facilities slowly reopened. As a result, an expansionary manufacturing cycle is anticipated to begin.”
Even still, a few positive indicators do not mean the economy is out of the woods yet. Not by a long stretch. Furthermore, the United States has accumulated an enormous and dangerous amount of debt while adding an unprecedented amount of currency into the money supply.
As I’ve advised before, it is best to proceed with a good deal of caution for the immediate future.
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